Experience Visit http://www.bklaw.com for more information on bankruptcy in general and Mark J. Markus in particular. Many questions are answered on the web page (hint, hint). The Markus webpage also contains more information on
Education/Credentials J.D., University of Arizona 1990. B.A. Economics, California State University, Northridge 1986. For more details please click here
My husband and I are considering BK due to overwhelming credit card debt and job losses. He is on SSDI and I will lose my job (layoff) on Oct. 30th.
I am scheduled to receive a lump sum severance that should total between $8K and $10K after taxes.
We were planning to file chapter 7, which I believe we qualify for based on my research, but my concern now is that our creditors, the trustee or the bank will freeze or seize our joint checking account when we file, even if the severance has not been paid out when we file. It will likely be there by the time of the 341 meeting. Can you give us insight into whether the money in our account is safe from seizure? I read somewhere that anything over $4000 can and will be seized, but I can't find any actual law on this. We live in CA.
Thank you for your help.
ANSWER: You're mixing up a lot of different issues here, so I'll try my best to answer. What creditors can do depends on whether you're talking about pre-bankruptcy filing, or post-bankruptcy filing.
If you owe money to a bank, they can set-off the funds in your account against what you owe them at ANY time before you file a bankruptcy case. Otherwise, a creditor needs to obtain a judgment lien against your bank account in order to seize it.
If you have the right to receive a severance, then that is an asset which may or may not be exempt after a bankruptcy case is filed depending on what other assets you have to exempt. To see more on exemptions, visit http://www.bklaw.com/exemptions.html
You have a further potential problem that you haven't alluded to, and that is that the severance income will factor in to the means test analysis on your eligibility to file a Chapter 7 case, if it is received within 6 calendar months prior to filing your case. How it affects things in your case depends, of course, on the specifics of your situation.
QUESTION: Thanks for your answer. I'll try to clarify my question.
We moved our accounts from a bank with which we had checking and savings as well as credit cards with revolving balances, to a bank to which we don't owe anything. We opened a checking account at the new bank. We inquired about their policy re chapter 7 filing and the impact on customer accounts and their answer was boilerplate, i.e., they will comply with any lien filed. Our other assets are minimal.
As far as the timing of the severance vs the filing: we were planning to file chapter 7 in Sept. I will not receive the severance payout until early November. So I believe the severance will not factor into the means test, but I am concerned that by the time the BK goes through the system, the severance payout will be in our account and will be seized at that time.
What I was trying to accomplish is to file BK while we're both unemployed and not use the severance to pay our credit cards, but if our account will be seized anyway after filing, then that would be worse and we might as well run out the severance and file when we're really destitute.
Answer I think I've already answered your question and I don't see a new question here. Assets don't get seized after a bankruptcy case is filed. The Trustee takes possession of ALL assets you have in a chapter 7 case and will liquidate them unless they are exempt. SO, as I previously mentioned, this all comes down to what assets you have on the date your case is filed and their values and whether you have sufficient exemptions to cover them. $10,000 may be protected, but it depends on what other assets you have that need protecting.
